Analysis: Surge forecast for Pharmion drug

WASHINGTON, March 30 (UPI) -- Pharmion's Thalidomide may see a surge in front-line use in multiple myeloma after its expected approval in Europe, according to an analyst report.

Friedman, Billings and Ramsey surveyed physicians and found that, although only about 8 percent presently use the drug off-label for first-line therapy, this figure would jump to about 55 percent when the drug wins approval for the indication.

"That's a huge upswing," Jim Reddoch, an analyst with Friedman, Billings and Ramsey, told United Press International. The survey involved 10 European hematologists -- four from Germany, two from Italy, two from France, one from England and one from Spain.

Based on the results, Reddoch raised his expected penetration rate by 2012 for Thalidomide from 18 percent to 45 percent.

He noted that the stock is vastly undervalued given its potential, with the anticipated increased use of Thalidomide and the European approvals of Vidaza for myelodysplastic syndrome and satraplatin for hormone-refractory prostate cancer.

"Over the next several months, the overhang on the stock will completely resolve and go away," Reddoch said.

This is based on emerging data showing Vidaza is not losing market share to MGI Pharma's Dacogen and upcoming phase 3 data showing a survival advantage of Pharmion's drug, he said.

The longer-term outlook looks very bright, too, he said.

"In the span of 12 months (from the end of this year until the end of 2008), they could have three drug approvals," he said. "There aren't many biotech companies you can say that about."

David Bouchey, an analyst with Canaccord Adams, also thinks the stock is undervalued compared to its potential based on Thalidomide, Vidaza and satraplatin.

"Overall, I think it's tremendously undervalued," Bouchey told UPI. "There's a lot of potential for this company going forward that really isn't priced into the stock at all."

Bouchey also held the view that thalidomide use will pick up significantly once it wins the first-line approval in the European Union.

He anticipates current sales will more than double by 2009 to $177.5 million and triple by 2012 to $248.5 million.

In addition to being the only drug approved for first-line, it will probably have a significant cost advantage over Celgene's Revlimid and Millennium's Velcade that will help propel its uptake.

"Thalidomide will probably be about one-quarter the cost of Velcade and Revlimid regimens," Bouchey said, noting that cost is a significant advantage under the European system.

He anticipates a recommendation from Thalidomide approval coming from the Committee for Medicinal Products for Human Use by the third quarter or fourth quarter of this year, with formal approval following by the first quarter of 2008.

Bouchey sees a lot of upside potential for both Vidaza and satraplatin, which he anticipates will win EU approval in 2008.

He forecasts U.S. sales of Vidaza could double by 2012 to approximately $260 million, while satraplatin sales in the EU could do about $80 million in 2008 and shoot to more than $280 million by 2012.

"Pharmion's total sales could go from $238 million to almost $840 million by 2012," Bouchey said. "That's a pretty substantial growth."

Matthew Osborne, an analyst with Lazard, told UPI he, too, saw an improved outlook for Thalidomide after the EU approval.

"This is because the generic manufacturers providing it now will have to switch over to Pharmion's drug to ensure safe distribution of the company's S.T.E.P.S. program," Osborne said.

This program, which requires the registration of physicians, pharmacists and patients, is designed to prevent pregnant women from being exposed to the drug, which can cause birth defects.

Osborne projects Thalidomide sales will double by 2010 to $145 million -- $150 million.

Overall, he said he likes the company, noting that it is building a worldwide specialty oncology franchise.